JPMorgan pays $5.1 billion securities settlement to Fannie, Freddie

JPMorgan Chase & Co will pay Fannie Mae and Freddie Mac a $5.1 billion settlement to compensate for misleading the housing finance agencies about risky mortgage securities and home loans it sold them before the housing boom collapsed.

The deal is part of a larger settlement still in negotiations
with the US Department of Justice.

The settlement was announced Friday by the Federal Housing
Finance Agency, which oversees Fannie and Freddie.

"This is a significant step as the government and J. P. Morgan
Chase move to address outstanding mortgage-related issues,"
FHFA Acting Director Edward DeMarco said in a statement.

JPMorgan, the largest bank in the US, said the deal was "an
important step towards a broader resolution" of the bank’s
mortgage-related issues with the government.

The banking giant sold tens of billions in mortgage securities to
Fannie and Freddie, the FHFA said. Those securities tanked as the
housing bubble burst in 2007, going down billions in value. The
government bailed out Fannie and Freddie during the financial
collapse with aid totaling $187 billion. The agencies have since
repaid $146 billion, according to AP.

Earlier this month, JPMorgan had reached an agreement with the
Justice Department for a $13 billion settlement on allegations
regarding the quality of mortgage-based securities, or high risk
sub-prime mortgages, that it bundled ahead of the 2008 financial
crisis.

That agreement represented the most significant enforcement
action since the government initiated a task force at the federal
and state law level to pursue wrongdoing stemming from mortgage
securities.

Out of that $13 billion settlement, $9 billion are comprised of
fines or penalties, while $4 billion will go to relief for
struggling homeowners.

JPMorgan had set aside $9.2 billion in the July-to-September
quarter to cover mounting legal bills, pushing the company into
the red in the third quarter for the first time since 2004, and
the first loss under CEO Jamie Dimon.